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Corporation charitable contribution limit

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Definition of a charitable contribution

A charitable contribution is a donation to a non-profit. For a corporation, it presents the advantage to reduce its taxable income. This isn’t the only benefit: it can be to meet the employees or the executives’ real desire to have an impact on the world.

Behind the concept

Those contributions can be in cash, or in goods. Some companies are giving cash in different ways: direct donation, support of employees donations, etc. Others give furniture, or excedent of merchandise, food, office furniture… All these kinds of gifts fall under the appellation of corporate charitable contribution. Corporate charity has a lot of advantages, but it needs to be optimised in order to have a real impact.

Charitable donations tax deduction

Even if individuals can make charitable contributions, corporations have more incentives to do it. In both cases, most countries propose tax deduction on the donations. But It is more attractive for corporations.

Most of the European countries have tax deduction incentives. In a certain percentage, proper to the country, the value of the donation is deductible from the tax bill. But in order for that to happen, it has to meet certain conditions. For instance, the charity to which the corporation is giving has to meet the criterions of the legislation.

Furthermore, it doesn’t concern all the non-cash donations. It depends on the country’s legislation but certain types of donation don’t fall under the tax deduction.

The limits of a corporation’s charitable contribution

All states don’t give tax deductions for every amount of donation. They put restrictions on a percentage of the income of the corporation in order to limit this practice. This varies from one country to another. It can go from 0.3% of the income of the corporation (in Slovenia) to 100% in the UK. It is thus more advantageous in some legislation.

It is often limited to the country itself. In this case, you have to make a donation to a charity in your country. But in the European Union, there are some charities for which it isn’t true. The donations to these are eligible for tax deductions too. They are some organisations that regroup them such as Transnational Giving Europe.